Corporate Blawg UK

Toxicity - a stag party in Birmingham

Ouch!  Corporate Blawg has returned from a great friend's stag weekend.  I'll tell you why "ouch":

Corporate Blawg is covered in welts from being pummelled by paintballs; he has aching arms and whip lash from crashing into barriers whilst Go-Karting; and worst of all, his pride is damaged from missing all the targets on the firing range. 

After his sh*te shooting, and poor pistoling, the rifle instructor publicly declared Corporate Blawg's effort back at the ranch, where the other instructors laughed in agreement that it was the worst anyone had ever done, even worse than a blind guy last year.  Corporate Blawg is glad that he does not need to kill to eat, and passes three Tescos on his way to work each morning.

Corporate Blawg then spent £45 on bets at the dog races, winning a total of zero pounds over a period of 2 hours.  In continuance of this appalling form, the stag party then hit the hotel bar, the Bank bar, the Pitcher and Piano and proceeded to study the form of other types of dogs. 

Uninterested in building physical bonds with Brummies, Corporate Blawg led the warpath to Legs Eleven, where he emptied his wallet into the purses of dancing girls, who have now booked their summer holidays to Hawaii. 

On confessing all, Corporate Blawg's wife was less than pleased by this behaviour.  Fortunately, Corporate Blawg's wife is kind and understanding, much more beautiful than any stripper, and will recieve that Links of London bracelet she pointed out to Corporate Blawg last week.

The stag himself got off relatively lightly, only having to be dressed up as Kate Bush for 24 hours, and being a firing target for all of the afternoon.  Needless to say, a great time was had by all.  However, now the toxins are oozing from certain of Corporate Blawg's pores which are outside the usual jursidiction for their expurgation.  Corporate Blawg is now suffering from a weekend of too many toxins in the city of toxicity.

The rather cool term relating to "toxic jurisdictions" is a term is not widely used to date, it will soon be, after this posting, probably.  The term has evolved from Rule 30.3 of the City Code on Takeovers and Mergers.  The Rule is part of the implementation of the European Takeovers Directive 2004/25/EC.

The rule states that information documents posted to shareholders and employee representatives must be posted to all shareholders and employee representatives no matter where they are.  Yet posting such documents in certain jurisdictions may create further obligations under that jurisdictions' securities law.  These jurisdication are known as toxic jurisdications. Consequently, it is not uncommon to see in such documents disclaimers and provisos stating that the document should not be served in U.S.A., Canada, Australia, Japan, China and now more often than not South Africa too.

Even though the rule is to be interpreted widely, the notes to the Rule 30.3 state a number of situations where it can be avoided, including:

In all other cases, the Panel may grant a dispensation where it would be proportionate in teh circumstances to do so having regard, notably, to the cost involved, any resulting delay to the transaction, the number of registered sharesholders in the relevant jursidcition, the number of shares involved and any other factors invoked by the offeror or the offeree company.

As in most other aspects of Mergers and Takeovers, the Panel is pretty much God.  And if you come across the term "toxic jurisdiction" again it is unlikley to be a reference to Corporate Blawg oozing alcohol out of eyelids, but more likely a country with tight securities laws.

P.S. Both Tim Kevan and The Bar Council have obtained Corporate Blawg's respect in a coup de force that Corporate Blawg did not expect.  Their action was simply to publish Corporate Blawg's comment here.  Well done chaps.

Hedge trimmer

The Alternative Investment Management Association has jumped on the chance to be the first to respond to the European Commission White Paper on Enhancing the Single Market Framework for Investment Funds which was published on 15 November.
          On 16 November, AIMA’s Executive Director, Florence Lombard said:

We are happy to see standardization of definitions for private placements but less so on the prospect of any new regulations.”

To feminize the words of the iconic Mandy Rice-Davies - well, she would say that wouldn't she?

Hedging bets against regulation

After recent criticism of the FSA, Corporate Blawg UK is glad to have found an area where the pragmatic and cool judgement of the FSA sets them apart from their U.S. counterparts.  Although the need for debate and development has clearly been promulgated from the U.S., the FSA have responded with practical steps that may actually benefit the market, and not simply be a bamboo-crunching panda to the U.S. giants.
             The key point is that hedge funds are largely secretive in their investments and operation.  Since the failure of large hedge funds, or hedge fund clusters, have the potential for impacting the confidence in a capital market as a whole, there are calls for greater disclosure and industry regulation. But how to go about this when the secrecy in the investments, strategy and portfolio gives hedge funds their industry advantage?  The U.S., FSA and IOSCO are still working on this issue, but the detail below should give a summary of the current standing:

The U.S. debate

The risks faced by the hedge fund industry have been apparent since the collapse of Long-Term Capital Managament in 1998.  In 1999 the U.S. Federal Reserve considered the policy issues raised and releaed a report entitled "Hedge Funds, Leverage, and the Lessons of Long Term Caputal Management".  The lessons of this report have since been reviewed by the Chairman of the Federal Reserve, Ben Bernanke in May this year.  BB found that the main mechanism for regulating highly leveraged investors and other aspects of risk taking in the market is the creditors, counterparties and investors.  As a result of the 1999 report, regualtory authorities in the U.S. issued guidance on risk management practices, and bank sueprvisors now actively monitor and conduct targetted review of banks' dealings with hedge funds.  This paper did not recommend direct regualtion of the hedge fund market.  This is because direct regulation is throught to impose costs in the form of moral hazard, the likely loss of private market discipline and the possible limits on the funds ability to provide market liquidity.
           BB Chairman said that this approach has been found to be largely effective.  The general perception is that hedge funds are less highly leveraged than in 1998.  Some of this progress is due to industry-led efforts such as the report by the Counterparty Risk Management Policy Group (CRMPG) that lay out the principles that institutions should use in measuring, monitoring and managing risk.  Despite this progress there are four concerns that BB highlighted in his speech:

• competition for hedge fund business has eroded initial margin levels
• increasingly complex transactions increase counterparty exposures and may not be measured accurately
• more extensive stress-testing should be done
• the assessment of counterparty risks should be better tied in to the amount of transparency offered by hedge funds.

Concerns about hedge fund opacity and possible liquidity risk have motivated a range of proposals for regualtory authroities to create and maintain a database of hedgefund postions.  BB remains sceptical of the value of such databases.
          The day after this speech, Cynthia Glassman, the Commissioner of the U.S. Securities and Exchange Commission ("SEC") noted that in December 2004 the SEC adopted its rule to requiring certain hedge funds to register with the SEC.  The paper points out that in June 2005, the FSA published a discussion paper entitield "Hedge Funds a discussion of risk and regulatory engagement",  In March 2006 the FSA published feedback on the potential next steps.
           When the Chairman of the the SEC, Mr Cox, spoke on 27 July 2006 on the benefits of hedge funds being "capital formation, market efficiency, price discovery and liquidity", he added that "there should be no portfolio disclosure provisions".  This directly aims to conserve the secrecy of the hedge funds in the US, but will they leave themselves open to another 1998 Long Term Capital Management debarcle?

The U.K. solutions

On 21 September, Hector Sants spoke at the IOSCO meeting in Shanghai.  He pointed out that the FSA authorised firms manage at least $256bn representing over three quarters of hedge fund assets.  The FSA see five key areas of risk:

1. The failure or significant disterss of a large and highly exposed hedge funds, or a cluster of smaller hedge funds can cause serious market disruption.
2. Some hedge funds may be testing the boundaries of acceptable practice, creating incentives for market abuse.
3. Problems such as late trade confirmations, non-notified trade assignments and novations add significantly to market-wide operational and credit risk levels.
4. Mis-valuation of complex illiquid instruments / fraud.
5. Some hedge funds issue undisclosed side-letters which offer enhanced liquidity and other preferential benefits to selected investors.

Now the FSA certainly seem a lot more focussed on the issues that the U.S. counterparts, except where the FSA then state "Firstly, I must emphasize the FSA is not seeking to authorise and regulate the funds themselves which are outside our jurisdiction".  Well that's okay.
           In order to prevent market disruption the FSA suggest supervisor discourse, and six-monthly surveys of exposures to hedge funds.  The FSA are also undertaking further work with banks on collateral and margin arrangements even though they recognise tthat this approach may have severe limitations on the value of the content, and may cause moral hazard.
           The FSA maintain that Market integrity can be maintainted by "credibled deterrance".  There are four key components to this:

(a) pro-active surveillance on likely 'hot spots'
(b) modern transaction analysis system
(c) an effective enforcement proposition and
(d) industry cooperation to ensure a steady flow of information.

The FSA notes that the US Federal Reserve have assisted in establishing a co-ordinated global response, especially in relation to the concern for significant trade information backlogs in credit derivative markets.  Following from Cynthia Glassman's comments, it appears that mutual backslapping is never amiss.
          Close work with IOSCO on the valuation of hedge funds have helped, and a project on the hedge fund valuations will be completed in April 2007.  The FSA have presented views on good practice to IOSCO valuations working group and intend to write a more formal letter outlining the views, which will become public later this month.
          And finally, the FSA believes that failure by hedge fund managers to make adequate disclosures is a  breach of Principle 1 of their Principles for Business ("A firm must conduct its business with integrity").   The FSA is working to produce material and non material side letters (e.g. special redemption rights are material, but preferential fees are non-material) and possible methods of disclosure (e.g. update in monthly news letters).
         The FSA also point out the risk that hedge fund positioning and momentum under certain conditions can be self-fulfilling.  Fundamentally, efficient capital markets need to embrace diversity, whilst ensuring good behaviour by all market participants.
         Corporate Blawg UK expects that the amount of regulation of hedge funds will depend on whether future hedge fund failures can be boiled down to regulatory inefficiencies.  If so, greater regulation will be forthcoming. If the status quo is maintained, and hedge funds do not find themselves on the wrong side of the market abuse fence, it will take a particular risk-averse regulatory authority to push through new measures for greater disclosure.  It is likely that the hedge fund industry will only have itself to answer to, in regard to the destination of its navigation through these turbulent regulatory waters.

Cool terms: "spring-loading" or "bullet-dodging"

The guns came out at dawn. The legal phrase was cocked and ready to blow.  At the start of September the U.S. marshalls declared they would clamp down on the cowboys that manipulate markets with news affecting the price of share options.  Corporate Blawg UK notes that two weeks later the same whirlwind was to hit our chalky shores.
            This week the FSA have warned in its Market Watch September newsletter (published on the 25th) that companies should not attempt to manipulate the market with spring-loading or bullet dodging, or they could face unlimited fines and public sanction.
            Corporate Blawg whistled towards these cool terms and explains that when options over shares are granted, a company may manipulate the market with good or bad news to make those options worth more or less. 
            Spring-loading is when a company brings forward an option allocation date so the holder can benefit from anticipated rises in the share price.
            Bullet-dodging is the opposite, when the company delays the grant of an option so the owner can benefit from an expected fall in share price.
            The facts of each case will determine whether spring loading and bullet dodging amounts to market abuse under the Financial Services and Markets Act 2000 (FSMA). Market abuse may be caused by an employee acquiring, or person granting, options on the basis of inside information.  Section.118(3) FSMA (improper disclosure) may apply where a director discloses information to the person responsible for granting options, in order to affect the timing of the grant of the option, and that information relates to a forthcoming announcement. Section 118(4) (misuse of information) might also be applicable for where information is used to decide the timing of grants.  Any decision by a company to give clearance for dealings during the run up to the release of inside information would be a breach of the Model Code. There are a number of other provisions under which the FSA could stir trouble for dodgy directors or corrupt CEOs.
            Although the widespread use of share options as executive remuneration is relatively new, this method of manipulation of the market has been recognised since at least 1997.  In this year, the US Journal of Finance published an article by Dr David Yermack on "Good Timing:  CEO stock option awards and company news announcements." 
           The irritiation of the financial regulators with this "good timing" reached a crescendo on 11 September 2006 with a speech by John W. White, Director, Division of Corporation Finance of the U.S. Securities and Exchange Commission ("SEC").  John highlighted the issue, and obfuscated it with interesting jargon including a name for the process in which companies should disclose their option strategies: nicknamed "CD&A" or Compensation Discussion & Analysis.  Inspiring.
            CD&A boils down to companies having a scheduled plan or strategy that is clear and transparent. Companies should disclose these plans and strategies to their audit firms, and fully address the issues of timing for options and for disclosing information.  Whether such strategies will hit the mark, and are adminstratively feasible is yet to be tested.  Corporate Blawg looks forward to reviewing option grant strategies in corporate due diligence in the future.
            The fact that this is not the first media-hitting declaration to come out of the FSA two weeks after a similar excitement in the U.S., suggests that the Anglo-speaking financial regulators are a bit like film distributors, and launch their new products in the US market before the rest of the world.  Accordingly, Corporate Blawg U.K. has decided to keep a closer eye on movements in the U.S. financial regulatory markets, in order to forecast the news-worthy motions of the FSA and be a fortnight ahead of the game.  Whether this will help Corporate Blawg's solicitous career or his salacious blog is anyone's guess.

Mergers in the Money Markets

Renowned for their short and punchy titles, on Tuesday the Financial Services Department of the Internal Market Directorate of the European Commission released a proposal for a directive called: the Directive of the European Parliament and of the Council amending Council Directive 92/49/EEC and Directives 2002/83/EC, 2004/39/EC, 2005/68/EC and 2006/48/EC as regards procedural rules and evaluation criteria for the prudential assessment of acquisitions and increase of shareholdings in the financial sector.
           Right.
           What does it do then? 

The proposal aims to considerably improve the legal certainty, clarity and transparency of the supervisor approval process with regard to acquisitions and increase of shareholdings in the banking, insurance and securities sectors.   

Lord Woolfe eat your heart out.  Whilst ploughing through this tome, it becomes clear that although the proposed directive does not contribute much to Eurojargon it does cause a vicious wound on the international plain language campaign.
           Drilling down, the proposal closes the list of criteria on which an acquiring company should be assessed by a Member State authority.  These criteria include the reputation of the proposed acquirer, the financial soundness of the proposed acquirer, the reputation and experience of any person that may be in charge of the resulting institution or firm, compliance with relevant EU Directives, and the risk of money laundering and financing terrorism (can't keep away that paranoid old chestnut).
            The Directive reduces the assessment period from three months to 30 days and allows the supervisory authority to 'stop the clock' only once, under certain conditions.  Corporate Blawg UK contends that this may lead to administrative difficulties, errors, oversights and altogether frantic inefficiency, but the Commission's risk assessment says it will not.
            The Markets in Financial Instruments Directive (slightly more succinct) requires parrallel provisions for investment firms and regulated markets (Articles 10 and 38).  In view of this, and further consolidation of stock markets, the Commission has promised to urgently consider whether these procedures and markets should apply to regulated markets too.  They intend to facilitate the smooth functioning in the Internal Market by preventing protectionist policies in Member States.   This sounds fine in principle, but how the Commission will go about it is more the worry.  When investigating whether to apply these procedures to capital markets the Commission has stated that it will take into account the special nature of the business conducted on these markets, as well as the views of stakeholders and regulators, so send in your petitions now!
            Hurry.

A Brief History of Financial Markets

Following the “History of Shares” post on 22 August, Corporate Blawg UK decided that some further clarity on Stock Exchanges was required.  Corporate Blawg UK has summarised below the glittering history of the stock exchange:

• The first stoke brokers were established under Phillip, the Fair, of France (1268-1314).  Phillip was known as "the fair" for his good looks, and not for his brutal persecution of Templars, Jews and Lombards (Italian bankers).  A bit of a control-freak, Phillip found a need to regulate those who dealt in commercial bills of exchange, and those who managed the debts of agricultural communities.
• In many European countries the stoke exchange is known as the Bourse.  The origin of the Bourse can be traced to the 13^th Century when traders gathered to trade in front of the hours of the Van Der Buerse family in Bruges, Belgium.
• By the mid 13th century Venetian bankers traded in government securities, and in 1351 the Venetian Government outlawed the spread of false rumors which could lower the price of these securities.
• Antwerp has long been a centre for diamond trading and in 1460 the Antwerp Stock Exchange (1460) was the first to be housed in an official building.  In 1531 the first building was erected that had been designed specifically for the purpose of being a stock and trade exchange.
• Other centres of commerce popped up in Lyons (1506), Toulouse (1540), Hamburg (1558), and London (1571).
• In 1602 the Dutch invented the concept of the Join Stock Company, and the Amsterdam Stock Exchange was the first on which shares could be bought and sold, with the shareholder taking a part of the companies profits and losses.
• In 1773, London stock dealers, who had been meeting informally in coffee houses, excitedly moved into their own building to establish their own exchange.
• The London Stock Exchange now has more than 2,800 companies, worth over £3,500bn.
• The biggest three Stock Exchanges are New York ($13 trillion), Tokyo and London.

The Stock Exchange in the UK

The London Stock Exchange (LSE) is regulated by the Financial Services Authority (FSA) which acts through the UK Listing Authority (UKLA).  Listing securities is regulated through legislation including the Financial Services and Markets Act 2003 and EC Directives, and through internal regulation such as UKLA’s Listing Rules and the LSE's Admission and Disclosure Standards.

            AIM is the LSE's Alternative Investment Market and was launched in 1995 for small or new companies. In 2004 AIM alone accounted for 65% of all Initial Public Offers (IPOs) in Western Europe.  Currently there are more than 1,060 issuers listed on AIM with a combined market capitalisation of £37bn.  AIM companies are not bound by the UK Listing Authority's Listing Rules.

            There are a number of other sub-markets in the UK, and huge variety of markets throughout the world (LandMARK, Euronext.liffe, NASDAQ, Osaka etc) and whichever market is best for a company depends on the sector, the investor-base and the size of investments.  Although geographical proximity is still very central to the market a company will float on, the Sarbanes-Oxley Act has made it much more difficult for small business to raise money on the U.S. capital markets.  The ease with which companies may raise funds, and the reasonable amount of regulation giving invester comfort, is a prime reason for the massive success of the AIM market for overseas companies. As long as it brings in the fees for corporate lawyers, Corporate Blawg UK is happy to see this prosperity continue (unless it means working at weekends).

Standstill - not acting in concert

Following from the Corporate Blawg entry on "White Knights", Corporate Blawg has journeyed on a further hunt in the territory of financial regulation bashes.  Where two parties act together to take over a target party they are said to be "acting in concert", and this has implications in the Takeover Code.  Parties may enter certain types of standstill agreements without acting in concert.  Generally, "acting in concert" can be dangerous territory since parties acting in concert may sing as harmoniously as Nat King Cole and Ella Fitzgerald, or as discordantly as Elton John and Pete Doherty, and either way, the Takeover Panel will expect front row seats.
           Where a standstill agreement could affect a merger or acquisition, Note 5 of the Takeover Code assist with its the definition of “acting in concert”:

Standstill agreements between a company, or the directors of a company, and a person which restrict that person or the directors from either offering for, or accepting an offer for, the shares of the company or from increasing or reducing the number of shares in which he or they are interested, may be relevant for the purpose of this definition. In cases of doubt, the Panel should be consulted.

This means that where a company restricts a person from accepting or making an offer for shares, those parties will be acting in concert. In corporate law, standstill agreements are considered to be agreements which do prevent signed parties from buying or selling each other's shares. They may achieve this by: (a) two companies agreeing not to bid for each other, or (b) a company or its directors and a shareholder agreeing to restrict the shareholder's rights to sell its shares or otherwise reduce its shareholding.  This may have a variety of purposes, but primarily aims to protect a company's ownership and control.
            However, on 22nd August 2006, the Takeover Panel clarified their position on this Note 5.  The Takeover Panel stated that where a standstill agreement is entered into the Takeover Panel will not normally consider a concert party to exist between the parties, provided the agreement does not in any way restrict any of those parties from either:

1. accepting an offer for the company’s shares at any stage; or
2. agreeing to accept any offer for the company’s shares either before or after its announcement.

This exception is intended to apply to a standstill agreement between the company’s financial or nominated adviser and /or its sponsor and /or underwriter, rather than the company or directors themselves.  A classic example would be a standstill agreement entered into at the time of a share offering, with a view to ensuring an orderly aftermarket in the company’s shares (for related issues see "Green shoes").  The Panel have clearly been inundated with requests for consultation on this situation, and wish to reduce their rather large workload.
          Digging their heels in the sand, the Takeover Panel retain that where two parties intend to enter into standstill agreements which are not between the Company and its advisors, for example between two shareholders, or in any other cases of doubt, the Takeover Panel should be consulted in advance.      

Quite a white knight, right.

The cool term "white knight" lends more to a shining vision galloping over the hills, than to the 12th move of the Immortal Game when White's knight protected the pawn which was attacking Black's queen.
          In law, the term "white knight" describes a friendly company arriving at the messy scene of a hostile takeover and acquiring the target company. The white knight  may slay the hostile bidder with a higher bid or a more favourable deal for the target board's management.
          The actions of a white knight may have untoward implications in the Takeover Code, as a white knight and target company may be perceived as parties "acting in concert". Persons are acting in concert where an agreement or understanding exists requiring the parties to actively co-operate with the acquisition of shares that enable oen or both of the parties to obtain control of the target company.  Although there is nothing in the Takeover Code to prevent parties acting in concert, it does place limitations on the parties, for example, in the transfer of target company shares (perhaps giving give rise to an obligation to make a mandatory Rule 9 general offer to all shareholders). The Takeover Directive amends the definition of “acting in concert” so that it will not require "active" co-operation between the parties, and it will apply to co-operation outside of simply the transfer of shares, and it will also involve "white squires".
          In the UK the term "white squire" describes a party which builds up a stake in the target in order to block any hostile takeover bid.  Unlike a white knight, the white squire does not purchase a majority stake, but a lesser stake which is equally effective in warding off the Black Knight (see below).
          The leading case concerning "white knights" is Morgan Crucible Co plc v Hill Samuel Bank Ltd and others [1991] 1 All ER 148, which suggests that a white night and hostile bidder may be distinguished in the run-up to a bid. This has implications on the duty of care owed to the white knight by the target. The reasoning is that when a white knight is approached by the target it is merely a member of an indeterminate class, and a lesser duty of care may be owed to it.  This view has not come before the courts again since Morgan Crucible, and has therefore not been properly tried, and tested.
          Corporate Blawg UK must pay homage to Investopedia, which inspired this posting.  Accordingly Corporate Blawg UK sets out a number of other relevant terms:

BLACK KNIGHT: The company that makes a hostile takeover offer on a target company.

GREY KNIGHT: A second, unsolicited bidder which enters the scene in order to take advantage of problems between the first bidder and the target.

YELLOW KNIGHT: A hostile bidder that ends up discussing a merger with the target company.

Corporate Blawg UK has a few of its own suggestions to add to the lingo:

BLUE KNIGHT: A third party intermediary that strictly requires open and fair play between all parties at the table.

GREEN KNIGHT: A company that is the preferred bidder for the target company, due to its social and environmental policies.

RED KNIGHT: A shepherd's delight

Green shoes and white collars = pixie

Like a pixie drunk on the nectar of Rhododendrons, stock prices may oscillate, plummet or shoot up and fly away. This is not always desirable for the human machinations that power the financial markets.  In certain circumstances, such as the issue of new shares, the fluidity of the capital market must be stabilised.  Such stabilisation manipulates the market, but is a "safe harbour" from penalisation for market abuse. 

          This manipulation may seem like financial black magic.  Yet the Financial Services Authority and other regulators justify it as necessary for promoting an orderly operation of the market, as well as reducing investor nervousness and preventing short selling.  Apparently, the market as a whole benefits, since investor security in the stability of securities encourages its use for capital gain.

         When a new issue of security (e.g. shares) is placed on the market, there may be an offer period during which those shares can be bought at a certain price.  Investors are less likely to purchase shares if during that offer period the share price greatly fluctuates. Therefore, it is helpful to stabilise the price. 

           On an issue of shares a stabilising manager (i.e. underwriter) may over-allocate the securities to investors to ensure that the entire issue is purchased (a bit like airplane tickets by flight companies).  The stabilising manager may increase the number of shares available if the demand goes up, and thereby stabilise the price before the end of the offer period.
          A Greenshoe is this market pixie which was discovered in the United States in an issue of shares for the Green Shoe Company.  It is essentially a call option which allows the stabilising manager to purchase an agreed number of extra shares in order to balance any short-fall as a result of over-allocation.  The agreed amount of extra shares is usually around 15% of the issue.

           This mechanism protects the stabilising manager from having to purchase shares that have risen above the offer price. However, the golden heel is that a green shoe does not come into effect if the market price falls below the offer price, as the stabilising manager may purchase his shares at this lower price.

           The stabilising manager usually exercises the greenshoe at the end of the stabilising period, just before the closing of the offer.  Some issuers prefer not to include greenshoe options where the issuer wants to fund a specific project with a fixed amount of cost and do not want any additional capital.

           The FSA appear uncharacteristically uncertain as to the meaning of "Refreshing the Greenshoe".  Corporate Blawg UK has interpreted the meaning as basically using the Greenshoe option more than once (e.g. by reselling the underwriter's Greenshoe stock and purchasing more shares under the call option).  Despite being unclear as to its meaning, the FSA has taken the view that selling securities which have been acquired through stabilising purchases can not be categorised as being in a safe harbour from market abuse accusations.  However, the FSA cowers behind the caveat that this does not mean that the behaviour is itself abusive and such sales should be constructed in a way to minimise market impact.
          For some bed-time reading, the Financial Services and Markets Act 2000 (Market Abuse) Regulations 2005 (S.I. 2005/381) contains the current price stabilisation rules, which came in to force on 1 July 2005.